Spa consultancy and market research involve individual expertise and fall under Independent Personal Services: ITAT Delhi
Sujan Luxury Hospitality Pvt.
Ltd. (ITA No.2844/Del/2019)
Facts:
1. The assessee has made payments to two non-residents under Section 40(a)(i) of the Income Tax Act, but failed to deduct tax at source (TDS).
2. The payments involved were:
Rs. 9,65,000 to Ms. Rosamond Freeman-Attwood (a Sri Lankan resident) – for Spa consultancy and management services.
Rs. 5,61,700 to Elephant Pepper Camp Ltd. (Kenya-based company) – for market research services.
3. The AO held that these payments were classified as “Fees for Technical Services” (FTS) under Section 9(1)(vii) of the Income Tax Act and so TDS had to be deducted in India.
ITAT New Delhi held as below:
1. Since both treaties lacked an FTS clause, the only way these payments could be taxed was:
As Business Profits under Article 7 (requiring a PE) – not applicable, or
As Independent Personal Services under Article 14/16 – not applicable due to non-fulfilment of days-of-stay or fixed base conditions.
2. Spa consultancy and market research involve individual expertise and fall under Independent Personal Services.
3. The payment of Rs.9,65,000/- to Rosamond Freeman-Attwood and Rs.5,61,700/- to M/s Elephant Pepper Camp Ltd. which is not taxable in India and so as has been held by the SC in GE India Technology Centre case, there was no requirement for the assessee to seek a certificate for non-deduction of TDS in respect of the aforesaid payments u/s 195(2) of the Income Tax Act.
The copy of the order is as under:
